guy: europe's five-day winning streak falters following a rally driven by better than expected data. ministereconomy issues the toughest warning yet on brexit. and driving vw. audi reports that volkswagen towns the cost of the image scandal to break those numbers next. ".lcome to "the pulse stephani :

i'm guy johnson. francine lacqua up in the next h our. the data breaking out of the eurozone. we did the composite market eurozone pmi data. the february number a little better than surveyed. the survey number 53.0. that is a service line, composite line. better than anticipated. good news for mario draghi. we're also getting audi coming through. the 2015 profit fallen by 6.1%. it sees moderate unit sales growth. read through and see what i can see in terms of details. expenses in terms of the technicals for audi, a little

bit ahead of expectations. and as you can see there is the audi webcast. and we'll continue to monitor what is said. this is vw's luxury division. what will the read across before mercedes and bmw? those guys report in a few weeks' time. let's check in the european equities. the rally starting to fade a little bit. un surprising after we seen such a decent move to the upside. a decent move in equities over the last couple weeks. the euro stoxx 50 under down by .5%. let's get you caught up on all the news you need to know. more evidence of a china slow down this morning. the priced in composite output index fell into contraction less much. it hit 49, four points down from

gender. booties has cut its credit rating -- moody's has cut its credit rating for the biggest bank. a day after cutting 25 non-insurance financial firms to negative. north korea has fired several short range projectiles hours after the un security council passed its toughest sanctions yet. bannedtions limit all exports of gold and coal. china gave its backing to the new sanctions. global news 24 hours a day, powered by our 2400 journalists. guy? guy: thank you very much. the brexit debate take center stage this morning. george osborne as set to hit back at his conservative party

colleagues later today. the u.k. chancellor will tell the bcc that those who want britain to leave have not been able to offer the most -- answer aboutst basic questions how businesses would maintain access to a single market and the jobs and benefits it brings. ryan chilcote is at the conference. where does the business community stand? a nutshell,ow, in the business community is divided. if you look at the survey the british chambers of commerce - aelf did a monthly go - month ago, 60% favor staying within, 10% don't know, 30% against. as the director said all the business groups in britain only represent 25% of businesses here. small businesses make up a huge part of the business community. they are underrepresented.

many of them do not think britain should remain within the european union. actuallytimation, it's pretty close to 50-50 within the business community. really torn. one example of that is we're going to have the business secretary speaking in a while. he's going to make the opening remarks well ahead of george osborne. on repeatedwho has occasions spoken out against the european union, only a couple weeks ago decided to come out as part of the in or remain camp. has issues on both sides of the fence. i think is osborne he needs to convince business leaders that it makes sense to stay within the european union because osborne needs them to go to the public to show the public an it makes sense and economic, from an economic perspective. we look at the most recent itm poll yesterday, the public is

split down the middle at 41% saying we should remain and 41% saying we should get out. guy: thank you very much, indeed, joining us from the bcc conference. ubs says an exit from the e.u. could send a u.k. into recession. good morning, jeffrey. polls are split 50-50. we have seen the says that the pound is going to weaken. that's started to reverse of the last few days. is that an appreciation that there are risks on the other side or the realization that maybe this is a very long drawnout campaign and the pendulum has swung too far? jeffrey: i think it is a bit more of the pendulum has swung too far. when you look at the short positioning, maybe of the spec moments within the fx markets, they try to add on -- and that

started to look a little bit unsustainable. if you look at the fundamental arguments, the current account deficits, going to have problems being financed. the key is especially for those of the bcc are they going to be a will to say let's grab this opportunity, use that to kickstart competitiveness? so, this is an opportunity with brexit.- or without guy: if you were advising high net worth individuals with that risk,- that have an fx right now, with where does that sit with the pound? jeffrey: if you are dollar-based, with some degree of u.k. cash flow needs, we would advise them these are attractive levels and start averaging in -- be it just a

currency or for your cash flow needs or think about buying underlying assets as well. thereabouts of options in equity markets and corporate bond markets. now, for u.k.-based, for sternly to nominated -- that is a different story. how can i protect this? should i buy a neutral asset? i shift into dollars or other currencies? it depends on your point of view. there is greater interest from those who will think about averaging in now. guy: the idea is that you want to be long - the obvious trade for the referendum is exactly as scotland. sterling shorted long out. is that how it is going to work again? the scotland

referendum was more internalized. it needs isk is all an e.u. migrant crisis -- this is something beyond control on both camps. if you saw the scotland vote, it was a week or so. the poll came out suggesting those that could leave. that, and a lot of people in a picked up premium. out,u were averaging in your sewing downside now -- you are selling downside now. guy: stay with us. plenty more to discuss. stay with "the pulse." what winter cornu. terkorn knew.

and europe ways in on brexit. the french economy minister warns that a leave vote could result in the breakdown of the border treaty. can they make the case for britain inside the e.u.? e will talk to john moynahan later. ♪

guy: let's kill you caught up on everything you need to know this morning. here is the bloomberg flash. chesapeake energy or cofounder aubrey mcclendon has died in a car crash. a day after he was charged with rigging bids for oil and gas leases. he faces accusations that he conspired to kee drilling rights artificially low. he drove his car at a high rate of' speed. in earnings is higher consumer spending makes it easier to sell high-priced goods. sports shoemaker says net income will increase 10% to 12%. the growth margin loan there as much as one percentage point due to higher purchasing costs in

asia. that operating profit dropped 6.1% last year. the company says it was hit by -- many of the living in developing electric vehicle technology. volkswagen'smpany largest earning conservator. -- contributor. guy: let's talk about the euro stoxx 600. a little lower this morning. wages for the fed will raise. you can see the market expectations for u.s. rates. button and youo will get all the numbers you need to know. post the election, it does seem november and the united states. the pendulumshed too far. we were talking about a global

recession. everybody freeaked out about that. we've now come back and seen a decent rally inequities. we are back to neutral. stilley: overall, we're neutral equities. there are pockets of value out there right now. u.s. high yield, for example. there are issues. if you look at what if the fed is saying about the high-yield market, overall, no contagion effect. if i look at dollar funding demand, not seeing any stress there either. i think we should become the with -- if you have too much cash on the sideline, now is time to tiptoe back into european equities. overall, the clearly the downside risk remains. guy: what would it take to push of the other way? to push a positive? geoffrey: firstly, the u.s.

those are really big consensus markdown inu.s u.s. growth forecast. 2.543 range and now 1.5 to 2. range to nowo 3 1.5 to 2. a data are is surprising to the upside because expectations were so low. the payroll is up higher, wage growth, average earnings are going up. that could actually channel into demand. spending picks up. european stabilization, that could help things. guy: the likelihood of that happening? geoffrey: i am positive on the u.s. right now. the money, the pockets of money they are willing to spend. if you listen to the g-20, europe needs a big demand boost.

the difference in europe is that they are not relying on the consumer. those with fiscal space, i.e., germany, please generate. guy: that is not going to happen. geoffrey: -- change the mentality within europe. for example, looking at the china stimulus. the g-20, again, said individual single country level, even for china, single country level fiscal stimulus, the impact is much more amplified if you have a coordinated basis. coordination is hard now, but individual countries can turn around and them demand can come through. a positivesees from china fiscal stimulus, i th in kfor the sake of european growth, the pressure coming from the likes of italy and spain right now will alleviate the downside risks. that pressure on moving away from traditional german orthodoxy is going to strengthen things.

guy: is the migrant crisis going to add to that? geoffrey: i think that is budgeted already. you are going see a marginal gdp contribution. but that is consumption. there is a big difference between fiscal spending and consumption. no long-term effects versus investment. fiscal space, you're going to use it. you have to invest to longer-term growth. in the right areas. are they willing to do that? not yet perhaps. negative. can sell at germany is not all that far away from the. geoffrey: let's actually think 1bout what happened after q last year when the ecb did a big bank stimulus, and the 10-year was close to zero. then almost immediately a payback of 1%. you want to be positioned longer front end. so, that's challenging the ecb.

ask, what if it works, what if it does generate demand? what if they to take advantage of the compelling case and spend? will steepthe curve and. banks will be more comfortable with their margins. greater to be wary with position is as we head into ecb. guy: thank you very much, indeed. he is going to stay with us. up next, can audi drive a recovery for vw? we break down the numbers from one of volkswagen's most important divisions next. ♪

guy: 21 minutes past the hour. audi business has reported a drop of 6%. as it feels the pain of the diesel scandal. with volkswagens results postponed, the numbers give a useful insight into the wider businesses. bloomberg's deputy team leader for transport joins us now from berlin. what is the big take away from these numbers? a big drop in the emissions scandal story reading into audi. how do i take that into the wider business? the single biggest contributor to volkswagens earnings. these numbers in terms of

margins are actually about as good to slightly maybe even better than what investors had expected. we can see there was an impact from the scandal of about a quarter billion euros in spending last year. they areestingly, saying the cost of appearing vehicles in the u.s. this year will be in the mid-double-digit, a million euro range. guy: wow. ok, so we are starting to get some idea of the numbers and what it means in the states. thank you for updating us. di numbers. let's get back to geoffrey yu joining us from ubs. volkswagen is an interesting case because you look at germany and you look at what is going on with the carmakers over there. the issue of what happens with negative rates, how you get people spending again relative to a brand like that. what is your take on where we go

next with the ecb? the negative rate story coming out of japan, to many people minds makes an on compelling case for the ecb to follow suit. geoffrey: if you look at the countries with negative phrase, they have their idiosyncrasies. danes willand tie it is working fine. guy: but they are small, open economies. geoffrey: the euro-swiss has held ok. maybe some intervention as well -- and japan's case, if you look at the deployment of negative rights, they wanted to give themselves too much flexibility to the extent that the initial was assessed it compared to the rest, this is not significant at all. if you have to do it, you are going to mean it in a has to register with the currency. the eurozone's case, for the ecb, negative rates are already priced in. what is next? we're looking at scope and

p dos -- of assets as well you need to have their portfolio come through, not pushing money overseas. euro is quite attractive. crowds out certain sectors of investment grade, corporate bonds, is that going to push statement savings into riskier sectors. can that just help companies finance and kickstart risk and investment? force them into the market. show aggression, japan's expense show, yes, it can have an. in japan's case, it is pushing money overseas. it is going towards risk. how do you put stagnant flows into risk? it requires a mentality shift. as with thdsese things. mark carney just attacked negative rates. ing --e thinks it is worke geoffrey: he thinks germinates

should invest in the need to generate demand. if that happens, his chart said it lists all votes, because that ss going to be, -- there' going to be a slight investment deficit in germany and deals go up. guy: why not just raise rates? geoffrey: raising rates, at this point, given worries about a tightening and financial conditions, especially in europe, is that what banks need? of course no. they want yield curves to stephen. steepen. they will go with negative for now. guy: thank you very much for joining us. stay with us. we carry on the conversation on negative rates. later, i will speak to the governor of the czech central bank at 10:45 on "surveillance." not in negative rates yet.

getting very close. what would that mean for his economy? why would he want to do it? maybe because mario draghi is going to do it. coming up, 10:45 london. ♪

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it's more than just wifi, it can help grow your business. you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. welcome. you are watching "the pulse" in london. we are starting to get data dropping from the u.k. let me walk you to the services er, which looks very weak compared with a survey numbers. the february figure has come to at 52.7. the composite u.k. number 52.8. we were expecting a 55.1 for u.k. services pmi. 52.7 and has was

come through at 52.8. weakness. i'll get the producer to line up a shot of sterling for you. i would not have thought that sterling would take this number well now. and certainly it does look as if we have got some week data. we will bring that chart in the moment. more evidence of the china slow down this morning. composite output index which converses the services and manufacturing fell into bothaction -- covers services and manufacturing. moody's has cut its credit rating outlook on china's largest phone company and its biggest bank. the credit of assessor has reduced the outlook on 38 state owned enterprises a day after cutting 25 noninsurance firms outlook to negative. north korea has fired several short range projectiles into this ce hours after the u.n.

security council passed its toughest sanctions yet. it restrictions limit all banned exports of gold, titanium, rare earth and coal. china gave its backing to the new sanctions. a day news 24 hours powered by our 2400 journalists in a hundred 50 news bureau around the world. guy: thank you very much. i promise you a pound check. let me show you what is happening with the price of sterling. this is what is happening subsequent to the weak services data. the bulk of the british economy is services. the brexit affect positive -- possibly. trading at g .77. we got up to .78 a couple of days back.

we are seeing sterling weakening following this disappointing data. let's talk about the equity markets. the risk rally we have seen over the next five days starting to fade. let's go to mark barton. mark: we are now lower. this is the stoxx 600 since the 11th of february. benchmark felle to its lowest level in 2.5 years. this shows you the best-performing and worst-performing stocks. only 22 stocks on the stoxx 600 have fallen since that day, since february 11. look at some of the greek banks. being pummeled in recent years. up 128%. anglo american of 70%. thell see banks and miners, main constituents -- a chart i wanted to show you could five-day winning streak has come to an end. the data in the u.s. is beating estimates. the facebook was encouraging.

we have got jogs numbers on friday -- the beige book was encouraging. -- the jobs numbers on friday. any figure below zero shows that data is missing forecast, any figure above zero shows data -- what you'll notice is the u.s. line hasgure the white moved above the euro area fi gure. theeuro area figure, yellow line, falling to its lowest level since may 2013. the u.s. is at its highest level since november. the u.s. has been below zero for the best part of the last year. the euro area has been above zero but it is the u.s. that is raising rates and coule be raising them again in 2016 if the data continues to improve. this is adidas which hit a record high coming back a little bit today. it forecast of the 12% increase

in sales and earnings this year as consumers spend more ahead of the euro 2016 soccer or football tournament. the gross margin will narrow as much as one percentage point due otto higher purchasing costs in asia. this is the last earnings report as chief executive. the new chief executive takes over. this is arhold. the dutch retailer. today, fourth-quarter profit bea at estimates.be the grocery train is in the process of merging with belgium's group. ahold is lower. th were up for the six consecutive day but we are little bit lower. guy: bank shares have been among the worst this year. let's talk about the future of

the gulf region now. good morning. anking sector globally is going to a number of issues. certainly looking at energy prices coming down sharply. how does that read into your business? >> challenging times. you have to find your business. $1.8gulf states, had trillion as the oil gdp. now it is almost $400 billion down. they go from surplus to a fiscal deficit. to tight liquidity, contact financing is getting really fine. expansionary monetary policy is contained. they are very moderate in terms of expenditure. a solution has to be long-term. it impacts directly business model. banking is a subset of the infrastructure of the economy.

again, contact financing is going to get challenged on account of legal risk and disputes. it's going to be a very delicate balancing act. guy: give us a sense of how the demand for credit has fallen. >> well, tightening liquidity there could be a contraction in real order in terms of real estate contracts. again, retail demand. so this will have a cyclical impact in the business model. in have to be very clear terms of risk. the market risk is becoming visible. npl's are rising. typically, -- they are advancing. that is a bigger challenge. this is going to improve the balance sheet optimization, to

concentrate on improving the risk profile. guy: what do you expect npl's to do, to continue to rise? we have 30 bucks a barrel for 10 years. heavily.ill start the gdp growth will come down. it will have direct impact on your trade expansion. it means -- the service industry will go up. hospital, education, health care must improve. less margins, less profit, return to shareholders. it's the situation ever. borrowing costs go up. the s&p has downgraded three of the six states. that has got implications in terms of borrowing capacity and cost. that will reduce your margin. guy: there is a lot of

conversation, it peaked for me just before christmas about people talking thursday about the dollar pegs beginning to crumble -- in the gulf. what are you hearing? is that something we need to think about within the next year? is the peg sustainable medium-term? let's assume energy prices stay low, how sustainable is it? >> the peg will continue to be there. the gulf states made it clear economically and make sense. if you look at the monetary basis as a banks have got, the s&p released a report -- 70 months of monetary base. for qatar four years plus. they can hold. they can still hold parity linked to dolalr. guy: is iran an opportunity for you? to be ans going

opportunity because it is enabled for qatar and the gulf states. and everyone is going to explore. it remains to be seen far they can go in global terms. banking is global and they have to come to terms. if there is a process that is n optionined, the its a where we can explore the business model. guy: thank you for giving us your time. the ceo of doha bank. europe weighs in on the brexit. french finance minister threatening to roll back border agreements. can they make make a convincing case to the british people? ♪

guy: you are watching "the pulse ." the french economy minister says france would relocate its migrant camp from callais if the u.k. decides to leave the e.u. macron said if i were teresa like those rollout red carpets i would say we might have some repatriations from the city of london. ahead of wolfgang schaeuble speaking three times in london later today. let's bring in alan crawford. i want to start with macron.

why so aggressive? objective? alan: well, it's rather unusual for macron. it's usually the prime minister. so, take from that what you will. objective? either he has an extremely strong message, well, he wants to make it very plain but not very -- they're not very happy about what is going on in the u.k. ion: is that a reflect of french political stress? a reflection as well maybe this is going to be a negative campaign. this amped it up, but it was only going in that direction. alan: we have seen some pretty strong attacks launched by the government. so, it looks as though it could be quite a closer first campaign. campaign.ous

wolfgangs bring wil schaeuble into this. alan: i think what will we will see on show today, real number, this is the metal help negotiate german reunification he was there in the cabinet that decided on the euro. i think you will make the case for europe as opposed to warning of risks. remember, this is controversial in germany. we are not seeing the chancellor coming to give her view one way or the other. guy: why? alan: because it is controversial. they do not want to mix in with the u.k. domestic politics. i think the chancellor feels she has done what she is going to do, that she's helped bring about an e.u. agreement. wolfgang schaeuble is wolfgang schaeuble. guy: the way the french are

looking at this -- alan: i wouldn't get into so much detail. this is not the issue in germany . migration. that particular issue as it relates to brexit. brexit does not play in the same way there. guy: thank you for your time. alan crawford. to ryan chilcote at the british chamber of commerce conference. where wolfgang schaeuble will be speaking later. ryan: right now the business secretary speaking. you just heard from the british prime minister. he made his argument for britain remaining in the european union. if britain was to exit, that could lead to economic danger. i have one guest to completely disagrees with him. his name is john moynahan from vote to leave. thank you for joining us. you think the

u.k. should leave the european union because -- john: thank you for having me on and good morning. i think the prime minister, what you're seeing out of downing street is a carefully coordinated campaign. i have a piece of paper. that has not moved the polls. they thought that would get the thing to get everybody voting to stay in. now they are going into project fear. we, on the other hand, and that is not moving the polls either. we, on the other hand, have three highly positive reasons for leaving the e.u. the first is that it is a very that economic system. that tellsle market you what kind of products you should be allowed to buy. they've shelved until after june having -- they will take three times as long to boil your tea in kettles. be imposingl

central standards. it is a system that has led to the worst growing economic - in the world. the highest youth unemployment in the world. we can't get out of that without leaving. our youth on the plumbing is high. two -- our youth unemployment is high. first of all, the opinion is becoming recently irrelevant to use. . more and more our exports are to the rest of the world. so, the european union is more and more irrelevant to us. the third point is being promoted as ia free trade zone is a tariff barrier. they charge tariffs to us. barrier, rid of that our exports to the rest of the world could grow faster. that is where our future is. we are not little europeans. we are people that want to be on

the larger world stage. guy: the prime minister says no one in the brexit camp has made it clear how, i know you are saying it is not important, but how britain would still have access to the single market. where's the access come from? be europe's largest export market, 16% of exports from europe come to us. larger than exports to america or any other car she. they cannot afford not to have a free-trade term. they are going to set me exclude us from that? and that is with countries not in the european union. ryan: let me ask you about the minister'snce comments. he said they would roll out the carpet for bankers jobs. you say? john: it's ludicrous. said that would create a gigantic rush to people

to calla which would createi chaos. it is part of cameron's project. it is not coins a dental this is happening. as far as the french go, bankers laughingmomost set about with france providing a credible alternative to the city of london. ryan: we have to leave it there. chair of the committee from the leave campaign with the view that is opposed to the government view that the u.k. should remain in the european union. speaking with us at the british chambers of commerce annual conference. guy: thank you very much. looking for to hearing what wolfgang schaeuble has to say later on at the bcc. europe's winning streak running out of steam. we bring a summary of this morning's market news next on "the pulse." ♪

guy: interesting morning for the markets. let's get you caught up. here is the bloomberg business flash. adidas has forecast an increase in earnings as consumer spending makes it easier to sell higher-priced goods. the shoemaker says net income from operations will increase 10% to 12%.

gross margin will there was much as one percentage point due to higher purchasing costs in asia. audi has said operating profit dropped 6.1% last year. the company said it was hit by the cost of fixing manipulated diesel cars and developing electric vehicle technology. ise car manufacture, s volkswagen's largest earnings contributed. ahold has topped analysts estimates. belgianging with a group and posted income of 421 million euros, a rise of 39%. profitability in the u.s. and the netherlands improved the cost of cost reduction. that's your bloomberg business flash. guy: aubrey mcclendon, though one time billionaire wildcatter and fall --rise an air crash. in

it comes a day after he was charged with rigging bids for oil and gas leases. alix: aubrey mcclendon died in a car accident in oklahoma city. he founded the national gas producer in 1989 and saw its market value jumped to $35 billion in 2008. day after hees a was indicted by the department of justice for rigging bids for oil and natural gas leases. embankment and burst into flames. i spoke with the captain of the oklahoma city police department to see what the scene looked like. >> very falt. -- flat. you can see what is ahead of you. at the same time, we do not know what his metal condition -- medical condition. until the medical examiner can to a full autopsy, if he can with the remains, we will not know until then. alix: he was one of a handful of

gentlemen who pioneered the shale revolution in the u.s. another was sharif suku. it was mcclendon that helped suki get an idea, the first exporter in the u.s. >> devastated. aubrey was a good friend. like me had a high tolerance for risk. we did things that were complementary for many years. he was actually one of the first people who gave me the idea of exporting energy from the united states. alix: a huge loss for the u.s. energy world. guy: before we brought the program up, i want to show you what is happening with the price of sterling. the pound of taking a pummeling as the service sector in the u.k. drops to an almost three-year low. funnily enough, we bounce back a

couplbit. negative data coming out of the u.k. stay with bloomberg. "surveillance." up next. ♪ .

francine: china leaders gather. eakening growth. global rally driven by better than expected u.s. data. urope weighs in. a warning of a brexit. this is bloomberg's "surveillance". i'm francine lacqua here in new york with tom keene. we talk politics and china and negative